JPMorgan Chase & Co. plans to sell its stake in Saudi Investment Bank back to the Riyadh-based lender at a 24 per cent discount as it exits non-core holdings globally
Saudi Investment Bank signed an agreement to buy the 7.5 per cent stake, which JPMorgan held for more than 40 years, for $203 million, according to a statement on Sunday. The Saudi bank will pay 13.5 riyals a share and will hold the stock as treasury stock that’ll be reissued as preferential shares at a later date.
JPMorgan is one the biggest foreign banks in Saudi Arabia and the only U.S. lender with both investment and commercial banking licenses. It’s ranked second to HSBC Holdings Plc for M&A advisory work in the kingdom over the past seven years, according to data compiled by Bloomberg. The bank is in the process of “steadily increasing its local equities execution and custody capabilities,” JPMorgan said in a statement.
“Globally the firm has wound-down non-core holdings and projects over the past several years, and this proposed sale is consistent with that consolidation effort,” Bader Alamoudi, who runs JPMorgan’s Saudi operations, said in the statement. “We remain positive on the future growth of the Saudi banking industry.”
Lenders are looking at how to approach the Middle East’s biggest economy, which is embarking on an unprecedented diversification and privatization plan, but still blocks foreign control of local banks. While some European banks such as Royal Bank of Scotland Group Plc and Credit Agricole SA are selling stakes, others are doubling down on efforts to position themselves for a boom in advisory work, as well as corporate and consumer lending.
Saudi Investment Bank is the ninth biggest Saudi lender out of 12 domestic banks with $24.4 billion in assets, according to data compiled by Bloomberg. The lender expects to complete the deal by 30 September.
“The deal is advantageous for Saudi Investment Bank because they are getting it at almost a year-ago prices,” said Joice Mathew, head of equity research at United Securities in Muscat. “The timing of JPMorgan’s exit is interesting. Saudi is at the cusp of getting more international attention after the MSCI EM inclusion decision and a lot of international investment banks are trying to get into the country.”